Individual economists did point to particular problems

Outhor Philip Coggan criticized economists for their failure to predict the global financial crisis One of our followers Andrew Santarsieri pointed to those economists who DID warn of possible slump, but who went unheeded. In reply, Coggan writes this:

"Of course, you're right, individual economists did point to particular problems. Raghuram Rajan [former IMF chief economist, pictured left] delivered a paper on financial risk in 2005 and got dismissed. But his dismissal illustrates the problem; the dominant paradigm was that the financial sector would control its risks and that bubbles either could not exist, or did not need to be popped. Hyman Minsky was also ignored.

The problem is that in a boom everybody thinks they're brilliant. Central bankers think they have skillfully delivered inflation-free growth; the finance sector thinks it is brilliantly making profits; homeowners think they have shrewdly timed the market; politicians don't like to rock the boat. Naysayers are ignored."

If Coggan is right, who should we be listening to now?

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Wise Words

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